The Law @ Work

The Dangers of Misclassifying Employees as Independent Contractors

Massachusetts has one of the most — if not the most — restrictive independent contractor statutes in the U.S.  The statute is intended to protect workers by classifying them as “employees,” rather than “independent contractors,” and thereby grant them the benefits and rights of employment when circumstances indicate that they are, in fact, employees.  In keeping with its intended purpose, the Massachusetts independent contractor statute contains a three-prong test and places the burden of proof on the employer.  If the employer fails to demonstrate any one of the three criteria set forth in the statute, that is enough to establish that the worker is an employee rather than an independent contractor.

In Schwann, et al. v. FedEx Ground Package System, Inc., the plaintiffs were pick-up and delivery drivers for defendant FedEx in Massachusetts.  The drivers alleged that FedEx violated Massachusetts law by improperly classifying them as independent contractors when they were in fact employees of FedEx.  In a motion for summary judgment, the drivers argued that FedEx could not satisfy prongs two and three of the statute: prong number two, which required that the package pick-up and delivery services the drivers performed be outside the usual course of FedEx’s business, and prong number three, which required that the drivers perform similar services for independent third parties.  FedEx fired back in its own motion for summary judgment on all of the drivers’ claims on the ground that the Massachusetts independent contractor statute, as applied to the motor carrier industry, is preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA).

The U.S. District Court for the District of Massachusetts addressed FedEx’s FAAAA claim first, because if that argument were successful, it would mean that the court would not need to analyze the independent contractor statute claim.  The court held that the FAAAA did not preempt the drivers’ claims.  According to the court, the purpose of the Massachusetts independent contractor statute is merely to identify a class of workers protected by the Wage Laws, which, in turn, apply broadly to all employees in businesses in Massachusetts.  The statute, the court explained, simply tells businesses that operate in Massachusetts, including FedEx, when a worker must be paid as an employee; it does not speak to how a specific job is performed (e.g., how FedEx drivers deliver packages to customers).  As a result, the Court denied FedEx’s motion for summary judgment.

The Court next turned to the drivers’ misclassification claim.  With respect to the second prong, the drivers asserted that package pick-up and delivery is the whole point of FedEx’s business.  FedEx, on the other hand, claims that rather than being in the package-delivery business, its real business is “logistics,” more specifically, the operating of “a sophisticated information and distribution network for the pickup and delivery of small packages.”  The court sided with the drivers, concluding that FedEx could not claim that it does not provide delivery services by simply refusing to recognize its delivery drivers as employees.  Because FedEx must satisfy all three prongs of the independent contractor statute to rebut the presumption of the drivers’ employee status, the court did not need to consider the drivers’ claim that FedEx could not satisfy the third prong.  The court ruled that the drivers were employees of FedEx under Massachusetts law.  Thus, the drivers’ motion for summary judgment as to the misclassification claim was granted, and FedEx will owe them damages under the Massachusetts Wage Act.

It is extremely difficult to have a worker in Massachusetts who would qualify as an independent contractor under Massachusetts law.  Let this case serve as a reminder of the dangers of classifying employees as independent contractors, which ultimately can include treble (triple) damages under the Wage Laws.

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